DRP

381. DRP

Distribution Requirements Planning (DRP): MRP applied to the distribution side of the supply chain. Plans replenishment of regional warehouses / DCs / retail stores from upstream sources.

Whereas MRP explodes finished-good demand into component requirements, DRP aggregates downstream demand into upstream-warehouse requirements.

381.1. Setup

Multi-echelon distribution network:

                  Plant
                    │
              Central DC
                /   \
        Regional DC  Regional DC
         /   |   \      /   |   \
       Store Store Store Store Store Store

Each location has its own:

Forecast (or downstream-driven demand)
On-hand inventory
Lead-time from supplier upstream
Safety stock

DRP computes time-phased orders at each level so the right inventory arrives at the right place at the right time.

381.2. Pull-up logic

Each location computes:

{Gross need}_{𝑡} = {Forecast}_{𝑡} (for stores; sum of downstream orders for DCs)

{Projected on-hand}_{𝑡} = {Projected on-hand}_{𝑡 - 1} + {Receipts}_{𝑡} - {Gross need}_{𝑡}

{Planned order release}_{𝑡 - 𝐿} = Replenishment quantity if projected drops below safety stock

The store’s planned order becomes the regional DC’s gross need; the regional DC’s planned order becomes the central DC’s gross need; etc.

381.3. Difference from MRP

	MRP	DRP
Direction	Top-down (BOM explosion)	Bottom-up (demand pull-up)
Goal	Plan production / materials	Plan distribution / replenishment
Bill structure	Bill of Materials (parts)	Bill of Distribution (network)
Demand source	MPS (planned), forecast	Customer demand (forecast or actual)
Time-phasing	Lead-time-offset for production	Lead-time-offset for shipping

Both use the same record structure (gross requirements, on-hand, planned orders) but with different drivers.

381.4. Why DRP matters

Visibility: every echelon knows what’s needed where, time-phased
Reduce stockouts at downstream locations
Smooth upstream demand (somewhat — bullwhip still bites)
Coordinate transportation: bunch orders into fewer, larger shipments

381.5. Bullwhip implications

DRP can amplify the bullwhip effect: lot-sized replenishment + safety stock at each echelon → upstream sees orders far more variable than actual end-customer demand.

Mitigations:

Smaller lot sizes (more frequent, smaller orders)
Information sharing (each echelon sees true end-customer demand, not just downstream orders)
VMI (vendor-managed inventory) — upstream supplier sees real downstream consumption

381.6. Connection to S&OP

DRP feeds into Sales & Operations Planning: balancing distribution-network requirements with production capability.

381.7. See also

MRP — the production-side counterpart
MPS — central production plan
Bullwhip Effect — DRP can amplify it
Multi-Echelon Inventory